I need help with these 2 problems and put them in excel please.
E7-6 (LO3) (AN) Always on the lookout for a good deal, Jeff's ears perked up when he came across this listing: "A slightly used (okay, VERY used) RV with 280,000 miles on it. No rust. Good physical condition. Runs fine. F sale for $30,000. A steal." Luckily, Jeff was very mechanically inclined, and could do basic fixes on virtually any make of vehicle. He also kne that a diesel RV could typically run for 400,000 miles or so. And that was all he was hoping for. Jeff's idea was t use this RV to travel the southern states and market his unique style of music. He had already cut two records, bu hadn't landed that big record deal yet. He hoped that with a little road time, he could make it big. But he didn' have a lot of cash to invest in a reliable vehicle or pay for regular hotel stays. Perhaps this RV would do the trick? Required: a) In the process of touring the south, Jeff will need to make some money just to get by and cover hi travel/living expenses. If he plans to live his life on the road for 3 years, how much will he need to mak each year (after tax) in order to earn an IRR of 3% on his RV investment? (his effective tax rate is 15%) b) Assume, instead, that Jeff more realistically expects that he will gain traction as time goes on. He plans to earn $8,000 in year 1, $14,000 in year 2, and $25,000 in year 3 (all of these amounts are net positive cas flows, before tax, and before any depreciation tax shield). Jeff plans to use this RV over just 3 years, a which point its value will be essentially zero. What IRR would his RV investment generate under thi scenario? c) Based on the above present value analysis, should Jeff invest in this RV? Explain in both quantitative an qualitative terms.P7-4 (LO1,2,3,5) (BT4) While Hannah was crunching the numbers on several capital budgeting scenarios, her computer rebooted without saving her latest work. Oh, the inhumanity!! Her last saved file included the following information for four independent investing scenarios: H 2 W 4 Cost of initial investment 5,000 un 100,000 $ 200,000 Life of investment in years 5 5 Salvage value at end of life (=book value) 0 5,000 10,000 Annual net operating cash flows S 700 10,000 S 35,000 ? Discount rate 8% ? 11% 9% Tax rate 22% 30% Annual straight-line deprec exp S 500 S 5,000 $ 18,000 Present value of salvage value ? 4,224 Present value of deprec tax shield S 6,494 Present value of operating cash flows ? 154,024 Accounting rate of return 0.136 Profitability Index ? Net Present Value of investment (17,365) Required: a) Help Hannah complete the missing information for each scenario so she can submit the analysis to the rest of her team. b) Based on your completed work from part (a), which investment proposals) should Hannah and her team consider further? Why? c) What additional capital budgeting tools or metrics would help the team rank these scenarios? If possible, calculate them. If not possible, list what additional information would be needed in order to calculate them
